2016 (11) TMI 1240 - ITAT PUNE

2016 (11) TMI 1240 - ITAT PUNE - TMI - Unexplained income under section 69A - unexplained cash deposits - Held that:- On perusing the affidavit that has been filed by the assessee before us, we find that if the assessee has inter-alia contended that the source of cash deposits to be out of agricultural activities and sale of agricultural land and that he was never told by his tax consultant that proceeds of agricultural land had to be co-related with the cash deposits in bank and that assessee h .....

e not available before the lower authorities, we are of the view that in the interest of justice and fair play, the issue raised in appeal needs to be considered afresh in the light of additional evidences submitted by the assessee. - Decided in favour of assessee for statistical purposes. - ITA No.946/PN/2014 - Dated:- 27-9-2016 - MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM For The Appellant : Shri V. C. Shah and Shri M. S. Patil For The Respondent : Shri Anil Chaware ORDER PER ANIL CHAT .....

The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) of the Income Tax Act, 1961 (in short the Act ) vide order dated 30.12.2010 and the total income was determined at ₹ 29,58,930/-. Aggrieved by the order of Assessing Officer, assessee carried the matter before the ld. CIT(A), who vide order dated 03.02.2014 in Appeal No.Pn/CIT(A)-III/Wd-1(1),Sol/516/2010-11/698 granted partial relief to the assessee. Aggrieved further by the order of ld. CIT(A .....

nd in the circumstances of the case and in law the learned CIT(A) erred in disbelieving the source of funds from which the deposits were made in the bank account and in sustaining the addition made by the Assessing Officer on conjectures and surmises which was done without giving adequate opportunity to explain the facts particularly when your appellant was not aware of the consequences of conclusions that may be drawn by the authorities. 3. On the facts and in the circumstances of the case and .....

ellant had clarified that the same was out of funds belonging to the Hindu Undivided Family of which he was the Karta and your appellant was under the impression that the source of funds was to be explained separately in his capacity as Karta of the family and the same need not be explained when he was explaining the source of funds in individual capacity. 5. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in granting only partial relief on account of fall i .....

ledge of different types in execution of contracts. 7. Your appellant craves leave to add to, amend, alter or delete any of the above grounds as may be advised. 3. At the outset, the ld. AR submitted that though the assessee has raised various grounds but the sole controversy which is to be decided is with respect to addition of ₹ 23,31,000/- made under section 69A of the Act. 4. During the course of assessment proceedings, on the basis of information generated through ITD application in t .....

sum exceeding ₹ 10 lakhs during the relevant period, but in the Balance Sheet filed by the assessee, the Saving Bank Account did not appear either in the Balance Sheet or in the books of account. The assessee was therefore asked to explain the transactions and also furnish the relevant proofs of source of cash deposits. The Assessing Officer noted that despite various opportunities granted to the assessee, the assessee did not furnish the relevant documentary evidences in respect of cash .....

e order of Assessing Officer by holding as under :- 5. I have considered the submissions made by the appellant with reference to the facts available on record. The appellant is a contractor by profession, carrying out construction activity under the name and style of Laxmi Constructions, a proprietory concern. The main issue relates to the cash deposited in the bank account standing in the appellant's individual name in savings bank account no 01/009099 maintained with Corporation Bank, Old .....

ubmitted by the appellant was that the substantial cash deposited into the said bank account was generated from agricultural activities of the HUF. However, no books of accounts have been maintained by the HUF. The only proof of the so-called agricultural income that are filed during the present proceedings (as the same have not been mentioned in the assessment order and therefore assumed not to have been filed during assessment) are the 7/12 extracts and some self-made vouchers to evidence sale .....

pur district, admeasuring 9H 33R. None of the 7/12 extracts make any mention of the HUF. The appellant has not supplied the dates of purchase of these lands. Apparently, however, as the 7/12 extracts show, some of the lands were mortgaged to either the Kumthe Society, Chincholi Cooperative Society, State Bank of India, or Corporation Bank for huge amounts of loans, ranging from 1 lakh to ₹ 25 lakhs, which indicate that the loans were taken for business purposes, which have also not been cl .....

at naturally arises on the borrowings made is that the same have been mortgaged by the appellant in his individual capacity for his normal business purposes. 5.3 Secondly, the lands are located at very great distances from the appellant's place of residence. For example, around 30 acres (13H 16R) of land at Kumthe in Solapur district is seen to be located at a distance of 189 kilometers from Solapur, where the appellant's main business activities are carried out. The lands at Chincholi a .....

appellant reveals that the total sales were to the extent of ₹ 33,94,234/-. However, no details of expenses incurred on the said lands have been filed nor it has been mentioned how these lands were cultivated. For cultivation of agricultural lands, a variety of expenditures are required to be incurred, such as land development (such as leveling, bundling etc.), water resources, tilling of land, expenses on manure/fertilizers/pesticides and other chemicals, etc., expenses incurred on seeds, .....

agricultural income," which was reiterated by the Apex Court in the case of CIT vs Ramakrishna Deo (35 ITR 312). In CIT v. Raja Benoy Kurnar Sahas Roy [1957] 32 ITR 466, which is regarded as the locus classicus on the subject of agricultural income, it was held that 'agriculture in its root sense, means 'agar', a field and 'culture', i.e., cultivation of a field. 'Agriculture' implies expenditure of human skill and labour upon land. After exhaustively discussing .....

to establish that the land in question was actually being used for cultivation at any time or any "basic operations" or "subsequent operations" as explained by the Hon. Supreme Court in Raja Benoy Kumar Sahas Roy (supra}. 5.4 The plea of the appellant is that the HUF has not maintained any books of accounts. Even so, no expenses are also found to be incurred and no supporting evidences are filed in this behalf, in case such expenses have actually been incurred. The addresses .....

;s bank account were from the HUF's agricultural income at the last minute, the appellant has tried to pre-empt any meaningful inquiries by the Assessing Officer into the genuineness and correctness of the claim, As held by the Honorable Supreme Court in R. Vekataswamy Naidu case (supra), the onus was primarily on the appellant to demonstrate that the agricultural income and therefore the source of cash deposits was explainable, but the appellant has not discharged that onus. It is not for t .....

8377; 8,31,000/- has been deposited on 27.03.2008. It is not known as to why the cash that was apparently generated from agricultural income was not immediately deposited In the bank account, particularly when the account stood opened with effect from 29.09.2006. The accounts stands in the individual name of appellant and not in the HUF status or even jointly with his wife Smt. Rupali R. Patil. The Assessing Officer has therefore rightly concluded that the sources of the cash deposited are not s .....

nt as income from other sources. The Hon ble Supreme Court affirmed the ITAT and High Court's views that taking into account the complete absence of resources and her age and the position in which she was placed, even when the explanation rendered may not be satisfactory, the AO was not justified in treating the investment as her own. It was held that in view of the words 'may' used in section 69 as against 'shall', Section 69 of the Income-tax Act, 1961 ('the Act') c .....

erred on the ITO under section 69 to treat the source of investment as the income of the assessee if the explanation offered by the assessee is not found satisfactory and the said discretion has to be exercised keeping ill view the facts and circumstances of the particular case . There is no quarrel with the proposition expounded by the Hon'ble Supreme Court in the aforementioned case. However, in the facts of the appellant's case, he is a civil contractor who is earning substantial inco .....

eeds and requirements. The cash deposits could therefore be presumed to be his undisclosed business income or income from undisclosed other sources. Therefore, in my view, the explanation of the appellant has been rightly rejected in view of the above facts and circumstances, and the ratio of the Hon ble Supreme Court decision in the case of P.K. Noorjehan does not apply to the facts of the present case. 5.6 In view of the facts and circumstances and the entire conspectus of the case as discusse .....

assessee owned agricultural land of more than 90 acres in HUF capacity. He submitted that assessee along with his brother had purchased agricultural land at Hattur on 16th September, 1999 and it was sold on 29th August, 2006 for ₹ 70,00,000/-. On the sale of the aforesaid land, assessee had received his share of consideration of ₹ 35,00,000/-, which was deposited in Solapur District Central Co-operative Bank. Out of the aforesaid deposits, assessee had made withdrawals for purchase .....

he land. He therefore submitted that the additional evidences submitted by the assessee in the form of explanation, the copy of bank statements, copy of Sale and Purchase Deed be admitted and since the source of cash deposits are fully explained, the addition be deleted. In the alternate, he submitted that the additional evidences submitted by the assessee before Hon ble Tribunal may be sent to the lower authorities for its verification and that they be directed to examine the same and thereafte .....

#8377; 23,31,000/-. Before us, it is inter-alia assessee s submission that the source of cash deposits are out of sale proceeds of agricultural produce and out of sale proceeds of land. The ld. AR has also submitted an affidavit of the assessee wherein he has explained the sources of deposits of cash. The affidavit which is submitted by the ld. AR is reproduced hereunder and reads as under :- AFFIDAVIT I Ramesh Sidramapaa Patil resident of 39/7 Railway Lines behind Saint Joseph High School Solap .....

s in my name. This bank account was in respect of my agricultural activity which is my family activity i.e. of hindu undivided family of which I am karta. I am attaching herewith a copy purchase deed of agricultural land admeasuring about 22 acres dated 16th September, 1999 purchased by me jointly with my brother at Hattur South Solapur District (Annexure A). I am also attaching herewith a copy of sale deed of agricultural land at Hattur Village, Tal-South Solapur, Dist - Solapur Sale deed dated .....

l Co-op. Bank Ltd. Attached herewith is a copy of bank account statement of said account for the financial year 2006-07 (Annexure C') This statement shows deposit of cheques of sale proceeds received as per above referred sale deed dated 29th August, 2006. This very statement at annexure C' shows that I had withdrawn cash on 1st December, 2006 of ₹ 25,00,000/- by drawing a cheque bearing No.1102425. This amount was withdrawn with a view of buy some agricultural land. I had purchase .....

Both these bank accounts being one with The Solapur District Central Co-op. Bank Ltd. and another with Corporation Bank are in respect of my agricultural activity carried on by me after getting land from my father who had inherited the same. As explained in assessment proceedings and also to CIT(A) I have agricultural land in excess of 90 acres and I get sale proceeds of agricultural produce. I do not maintain any books of accounts and hence same were never produced. I was required by my tax co .....

y activity as individual. I never knew that deposits out of agricultural activity was also to be proved. In letter dated 30th December, 2010 it was explained in assessment proceedings that the bank account referred related to my agricultural activity as Karta of HUF and I hold around 90 acres of agricultural land. It was explained that amount deposited was out of sale proceeds of agricultural land produce. I was never guided that as large amount of deposits were from sale of agricultural land th .....

riately to give facts which existed. I further state that I realized the consequences of not giving existing evidences and the learned C.I.T. disbelieving my agricultural activity as family activity and the fact that I attend to the agricultural activity and look after business partially. Solemnly affirmed at …… Pune……. By the withing named RAMESH SIDRAMAPPA PATIL -on this -18th Jan- Day of January, 2016 Deponent Sd/- Before me 8. On perusing the affidavit that has be .....